Highland Council has warned that a sweeping set of savings are needed after a large reduction in government grant funding means the local authority is facing a £31.2m budget gap for 2019-20.

The council’s bosses have warned it faces a “huge challenge” after detailed analysis of the Scottish Government’s funding settlement has revealed that Highland Council will see a reduction in its grant funding.

The grant makes up a vast proportion of the council’s budget and the reduction in government funding was far larger than expected which, coupled with additional pressures, means the council needs over £30m to provide its current level of services.

The council says it has been planning budget reductions for several months, with significant public and staff engagement to identify local priorities and areas of potential savings. Budget leader Alister Mackinnon warned that the funding settlement and demand pressures had “increased our anticipated budget gap substantially.”

He said: “We were already preparing for a significant reduction, but this news sets us a huge challenge and may mean we will need to bring forward savings from future years.

“The work we have been doing stands us in good stead and we are much better prepared for a challenging scenario. We have taken a new approach to the budget setting this year, looking at re-basing all budgets, focusing on outcomes and removing all inefficiency.

“We are also continuing to work on current in-year pressures with tighter financial controls and a freeze on filling vacant posts.”

Highland Council’s chief executive, Donna Manson, thanked the public and staff for their input on potential savings and commented: “The overwhelming theme has been that the council can be much more efficient and our aim is to do everything possible to demonstrate that we are listening and acting on what we have heard.”

The Scottish Government said Highland Council could raise council tax to support the delivery of local services, but COSLA has warned it has “significant concerns” about the draft budget announced.

Mackinnon added: “The situation will require big changes to what we currently do and how we do it and will require support from our workforce and across the political spectrum. We are determined to do the best we can for Highland within the resources we have and to deliver a budget which protects essential services and jobs which support the wider economy.”